What is a certificate of insurance?

If you’ve ever hired a small business or contractor to work on your home, you might’ve come across what’s called a certificate of insurance (COI). A COI comes in handy when there’s potential for liability, like injury or property damage. It helps the company or contractor prove they’re insured.

A COI is issued by an insurance company or broker. It verifies a person or entity is covered by an insurance policy. Use this guide to learn more about what a COI is, how it’s used and when to ask for one.

Key takeaways

• A COI is a document that shows proof of insurance.
• COIs are typically used by businesses and independent contractors to prove they have business insurance before doing work for a potential client.
• Asking for a COI before hiring a business or contractor might help avoid liability or financial loss if accidental damage occurs.

A COI is a statement of coverage issued by an insurer. It’s commonly used by businesses or independent contractors to prove they’re properly covered by an insurance policy. When hiring for a project that might come with business risks—like injury, property damage or even unsatisfactory work—a COI can be a safeguard from liability.

A COI lists information about the policyholder’s coverage, including:

• Name and address of the policyholder
• Contact information for the insurer
• Policy limits
• Effective and expiration dates of the policy
• Additional parties covered by the policy
• Type of coverage—like workers’ compensation insurance or general liability insurance

When a person requests a COI from someone else, they typically become a certificate holder. This means their name and contact information are listed on the COI form. The insurance company then must notify the certificate holder of any policy cancellations.

One instance to ask for a COI is when hiring a business or an independent contractor to do work on a home or property. Understanding the limits of the policy might help protect your assets if something were to go wrong. 

Let’s say a homeowner hires a contractor for a home renovation. During the project, $100,000 worth of damage is caused to the property. If the contractor doesn’t have an insurance policy in place, the homeowner could be on the hook to pay for repairs. If the contractor was only covered for $50,000, the homeowner might have to pay the difference out of pocket.

Requesting a COI as proof of insurance and reviewing the policy limits can help prevent any gaps in coverage—and avoid expensive mistakes.

The business owner or independent contractor should be able to get a COI from their insurance company—or give you their insurance company’s information so you can access the policy yourself.

When a company or contractor provides a COI, it helps to confirm a few things:

• The policy is current and doesn’t expire during the potential project.
• The name of the company or person doing the work matches the COI.
• The listed insurer is a legitimate company, agent or broker.
• There aren’t gaps in the coverage, depending on the anticipated project costs.
• The policy is valid each time they’re hired—even if you’ve worked with them before.

A COI is a tool that’s helpful for both business owners and customers to ensure there’s adequate coverage in place before the job starts. Knowing you likely won’t be financially responsible for accidental damage to your home or property can bring peace of mind. 

When taking on a home improvement project, it’s worth considering a homeowners insurance policy. Check out the cost of homeowners insurance to learn what you might expect to pay.